The new Asian Development Bank (ADB) report released on Tuesday (September 27, 2016) sees Indonesia’s economy to continue growing at a healthy pace in 2016 and 2017, despite a number of short term hurdles.
Updating its annual economic report, the Asian Development Outlook 2016, ADB corrected its estimated gross domestic product (GDP) growth for Southeast Asia’s largest economy from previously 5,2 percent in March 2016 to 5.0 percent for the same year. The bank also adjusted its growth forecast for Indonesia in 2017 from previously 5.5 percent to 5.1 percent. A slower than expected pickup in investment spending led to the adjustments in the new report.
Sona Shrestha, ADB Deputy Country Director for Indonesia, said that Indonesia is still about to grow at a healthy pace this year despite a challenging environment. Further economic growth in the coming year is likely since the country’s policy reforms start affecting the market and major industrial economies begin to rise, Sona explained.
The ADP report further finds higher minimum wages, increase in the tax-free income threshold and decelerating inflation as factors likely to spur further growth in private consumption. Rural incomes will increase due to higher budget allocations for the government’s Village Fund and better prospects for agriculture. Additionally, infrastructure is predicted to accelerate in the second half of this year as the government is expected to increase it’s spending in this sector, reflecting the annual pattern of higher outlays towards the end of the year.
Private investment will gain positive developments from the implementation of a series of policy reforms announced by the government, notably including the opening of an additional 35 industries to foreign ownership and the simplification of processes to attain business permits.